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1 11/05/2016 18:35 Strong recovery in Q4 post cyber attack Lowest - PowerPoint PPT Presentation

Jun 24, 2023 •205 likes •651 views

1 11/05/2016 18:35 Strong recovery in Q4 post cyber attack Lowest ever churn Flat net adds Strongest quarter of RGU growth +148k FY EBITDA 260m in line with guidance; material step up in H2 margin to 18.4% Reiterating FY17

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  2. Strong recovery in Q4 post cyber attack › Lowest ever churn › Flat net adds › Strongest quarter of RGU growth +148k FY EBITDA £260m in line with guidance; material step up in H2 margin to 18.4% Reiterating FY17 guidance: modest revenue growth and £320m-£360m Headline EBITDA Net debt /EBITDA reduced to 2.6x (H1: 2.8x) Dividend per share up 15% to 15.87p in line with commitment FY17 dividend expected to be at least in line with FY16 2 11/05/2016 18:35

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  4. Lowest ever churn › Broadband base stabilised Q4 Q3 › Focus on existing customers On-net Net Adds - -101k › Making TalkTalk Simpler benefits coming through Strongest quarter of RGU growth in On-net Churn 1.3% 2.1% the year › 90k mobile net adds RGUs 148k -70k › 72k Fibre net adds › -14k TV net adds 4 11/05/2016 18:35

  5. On-Net Revenue £351m Flat Lower on-net base post cyber attack Strong ARPU growth +3.9% year on year RGU/customer +9.0% year on year Strong comparative (Q4FY15: +14.3%) Strong Data revenue growth +40% Corporate Revenue £101m -2.9% Carrier flat in line with plan Continuing legacy voice trend -30% Off-net disposal to Fleur Telecom at end of FY15 Off-Net Revenue £15m -25% TOTAL £467m -1.7% 5 11/05/2016 18:35

  6. TalkTalk is a brand I trust (%) Satisfaction with Customer Service 47 45 41 74% 73% 72% 38 72% 72% 71% 37 37 36 36 70% 35 35 69% 69% 34 34 30 30 66% 64% 64% Nov-14 Nov-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 Lowest ever monthly churn Revenue Generating Units Added (k) 2.1% * Adjusted for bad debt disconnects (72k) 148 129 119 1.6% 1.4% 1.4% 1.3% 1.3% 1.3% 1.3% Q1'16 Q2'16 Q3'16 Q4'16 (70) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 6 11/05/2016 18:35

  7. £35m £56m Cyber Impact Lower SAC from better £170m channel mix and lower CPA £28m Lower Opex as transformation £31m costs fall out Gross Profit growth £90m £15m Materially higher Making TalkTalk Simpler Benefits £170m 18.4% 9.9% H1 FY16 H2 FY16 7 11/05/2016 18:35

  8. Y-O-Y Revenue Growth Y-O-Y Revenue Growth EBITDA +6.1% +2.4% £1,838m £260m £245m FY FY £1,795m +25.9% £926m +0.2% £135m £170m H2 H2 £924m +4.7% -18.2% £110m £912m £110m £90m £90m £871m £110m H1 H1 £76m FY15 FY15 FY16 FY16 Dividend per share Net Debt / EBITDA 15.9p 2.8x +15% 2.6x 13.8p FY16 Year End FY15 H1 8 11/05/2016 18:35

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  10. 4,177k 4,097k 3,996k 3,996k 72k 8k Disconnections for Trading 95k 6k change in credit Cyber Impact Trading policy Retail 3,326k 3,440k 3,166k 3,187k 830k 809k Wholesale 771k 737k Mar 15 Sept 15 Dec 15 Mar 16 10 11/05/2016 18:35

  11. Lessons from last 6 months Implications for FY17 and beyond Customers valued our open and honest Customers know that we save them money, approach during the cyber attack: and protecting that position is always important • Vast majority (73%) believe we looked after them Making TalkTalk Simpler is key to • 14% (489k) took free upgrade transforming from cheap to value for money: • Brand trust (47%) and consideration • Starting to deliver meaningful benefits (57%) higher than they were before the • cyber attack Critical to long term future Our relentless focus on improving customer More work to do to simplify products and experience is paying off: propositions to help customers make • Satisfaction growing informed choices • Calls to contact centres down • Abandoning line rental • New systems working well • Taking learnings from free upgrade offer Value for money Quad-play is working into ongoing marketing If we look after our customers they return that loyalty in spades 11 11/05/2016 18:35

  12. 90k mobile net adds in Q4 19% 19% of base vs 12% at end FY15 699 596 SIM-only continues to grow strongly – 13.5% market share in FY16, Q4 share 14.9% 464 348 284 236 175 117 H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16 H2'16 72k fibre net adds in Q4 19% 19% of base vs 13% at end of FY15 704 578 479 308 207 • Mobile and Fibre customers have higher Net Promoter 142 73 Scores and lower churn than phone and broadband 30 customers H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16 H2'16 • Are significantly more valuable 12 11/05/2016 18:35

  13. 38% 1,414k 1,439k 1,389k Year end base 25k lower than at end of FY15 1,217k • 20% growth in year on year on-demand usage 917k TV customers generate higher Net Promoter Scores and 557k lower churn than phone and broadband customers • Drives strong engagement and low churn 230k • Distinct proposition with significant value 0k H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16 H2'16 YouView integration of Free to Air, Pay, Over the Top and premium, linear and catch up channels highly valued by customers • Netflix searchable in YouView; on TalkTalk bill • Full range of sport including all Sky Sports and BT Sport Blinkbox capabilities have enabled launch of TalkTalk TV Store • access to pay content on multiple devices • another path to upsell proposition as content accessible without set top box TalkTalk TV Store 13 11/05/2016 18:35

  14. Corporate Revenue Sustained revenue progress +2.4% £384m £375m 104 101 +23.7% Data 95 95 94 93 91 +13.3% Carrier 89 88 87 82 -16.2% 80 Voice FY15 FY16 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY14 FY15 FY16 Ethernet & EFM Lines (‘000) Continuing strong demand for Ethernet, base of over 35.1 35,000 business Data lines connected 30.7 Carrier and Voice in line with expectations 26.2 21.6 VOIP proposition (powered by tiPicall) launched in 17.4 October 2015; gaining traction and expected to deliver 13.7 strong growth in FY17 10.2 7.1 Main constraint on data growth continues to be Openreach’s inability to keep pace with orders H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16 H2'16 14 11/05/2016 18:35

  15. 20%+ Growth Data & Over 30% of FY16 Group revenue Next Gen Voice Off-Net Phone & BB Phone & BB ON-NET (retail and w’sale ) (retail and w’sale ) TalkTalk Group Carrier Data & Next Gen Voice On-Net CORPORATE 0 Carrier Corporate Legacy Voice Legacy Voice Gross Margin -20% Continue to expect TalkTalk Business to grow faster than the group, doubling in size over time 15 11/05/2016 18:35

  16. FY 17/18 FY 15/16 FY 16/17 More capacity for Fibre New network design Simpler network Router DLM upgrade 1 Agent diagnostics Omni-channel fault mgmt Pro-active fault mgmt 2 Simpler fault 1 management Improve processes Harmonised trouble ticketing 2 Exception mgmt. Case managed end to end order experience Simpler order provisioning Replatform current provisioning systems Service fixes, e.g. address PEGA foundations Complaints on PEGA Retire legacy CRM Omni-channel 1 service Webchat Re-platformed website 2 1 Credit scorecards Collections on PEGA 2 Simpler credit 1 Non-Pay and billing Simpler billing 2 disconnects 16 11/05/2016 18:36

  17. Making TalkTalk Simpler benefits in FY16 Benefits in FY17 and beyond £21m incremental savings from: Expecting £35m - £40m incremental benefits in FY17 • Fewer complaints £90m delivered from programme in total • Fewer, shorter calls since FY14 • Fewer engineer visits Annualising at substantially over £90m • Lower churn from FY18 c 2.5m customers’ experience improved Pivotal to brand and financial transformation 17 11/05/2016 18:36

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  19. FY16 FY15 Year on Year £’m £’m Headline Revenue 1,838 1,795 +2.4% Gross Profit 993 980 +1.3% Margin 54.0% 54.6% Operating costs (473) (426) +11.0% SAC & Marketing (260) (309) -15.8% Headline EBITDA 260 245 +6.1% Margin 14.1% 13.6% +50bp Profit after tax 79 76 +3.9% Headline EPS 8.4p 8.2p +2.4% Dividend per Share 15.87p 13.80p +15.0% 19 11/05/2016 18:36

  20. £14m £32m £23m +4.7% £28m £66m £1,838m £1,795m +0.2% +5.9% +3.5% +2.2% -1.7% Q1 16 Q2 16 Q3 16 Q4 16 FY15 On-Net Data Carrier Off-Net Voice FY16 On-net revenue growth of 5.0% supported by ARPU growth, offset by declining voice usage and mix Continuing growth of Data and Carrier in Corporate, offset by Legacy Voice H2 reflects impact of cyber in Q3 and lower base in Q4 Off-net decline reflects sale of consumer off-net base to Fleur 20 11/05/2016 18:36

  21. Impact of SIMs given out in Free Upgrade RGU / On Net Base £0.86 £0.57 1.70 1.64 £0.24 £28.53 1.56 £1.51 1.46 1.35 £26.97 1.24 1.12 1.04 FY15 Price and New products Voice Mix FY16 H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16 H2'16 proposition Minimal impact on RGU/Customer from Growing RGU penetration and pricing offsetting mix and Free Upgrades post cyber declining voice usage 21 11/05/2016 18:36

  22. 1.0% 0.6% 0.6% 0.1% 1.8% 0.3% 1.0% 54.6% 54.0% H2: £506m 54.5% H1: £487m 53.4% FY15 Pricing & Non-Pay MTTS Corporate Data Mobile Data Usage Mix FY16 Proposition Disconnections Usage Significant step up in H2 gross margin and gross profit Mix impact includes phasing of some procurement savings into FY17 Lower mobile data usage impact in H2 compared to H1 22 11/05/2016 18:36

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